War threat casts shadow over Indian outsourcing

Businesses that have outsourced IT work to India are growing increasingly nervous as the threat of war continues to hover over...

Businesses that have outsourced IT work to India are growing increasingly nervous as the threat of war continues to hover over the sub continent.

"A number of organisations with operations in India have approached me about alternatives," said Geoff Petherick, a member of Eurim, the IT parliamentary lobby group, and a director of India-based company RS Software.

"The organisations most concerned are those with support operations in India, rather than those who have outsourced software development," he added.

Companies that have outsourced work to India or have large operations there range from Thames Water to Hewlett-Packard Europe, Dell, Sun and Microsoft.

So far there have been few signs of companies pulling out of IT-related outsourcing and research operations. Instead they are hedging their bets by implementing disaster recovery plans and scouting out alternative sites, according to analysts and industry leaders.

Petherick said companies were looking to spread risk. "Offshore outsourcing can offer considerable savings but there are now viable alternatives to India, from Russia and the Philippines to Malta," he said.

Indian outsourcers have not yet been hit by defections. "I have not heard of any existing contracts that are being cancelled," said Ravindra Datar, senior analyst for IT services at Gartner India.

"Our existing customers are concerned about the possibility of a conflict and how it may impact our ability to provide service, but based on our relationship, and the reliability of our service in the past, they are comfortable taking a 'wait-and-see' approach," said Prakash Gurbaxani, chief executive officer of TransWorks Information Services, a customer relationship management and business process outsourcing company.

Executives at multinational companies with design and development subsidiaries in India say it would be difficult to move work to other locations.

"It is close to impossible to move projects of the kind we are doing, because the expertise lies with the people here working on the project, and the option would then be to move all these people elsewhere," said Rajendra Kumar Khare, general manager of Broadcom India, a subsidiary of US broadband silicon products vendor Broadcom Corporation.

"At Broadcom we are focusing on ensuring the integrity of communications, and the creation of appropriate data backups as a contingency measure," Khare said.

At Infosys, one of India's largest software services companies, executives aren't worried about losing their existing customers. "I don't think any of our customers is reviewing doing business with us. In fact we signed a new deal just last week," said Phaneesh Murthy, head of worldwide sales and marketing at Infosys.

Warnings about travel to India from the British and US governments, among others, may slow down new business. "To the extent that customers may not travel to India because of the advisories, there could be a delay in finalising new deals," Murthy said.

Indian services companies are implementing disaster recovery strategies. "Ever since the terrorist attacks in the US on 11 September, our customers have asked us to put in place disaster recovery systems, which may be useful now," said Srikar Reddy, senior vice-president of software services company for Sonata Software.

According to Gartner's Datar, "Some of the top Indian IT services exporters already have offshore centres in other countries, while some are in the process of setting up such centres."

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